Directorate for Education and Skills

Investing in the Future

Remarks by Angel Gurría, OECD Secretary-General, for the launch of the 2010 edition of Education at a Glance

7 September, 2010, OECD Paris

Ladies and Gentlemen:

Thank you for being here today.

Every year Education at a Glance takes stock of where countries stand with their education systems and the progress they have made towards raising performance, improving equity and enhancing value for money.

This year’s edition comes at a time when all eyes are focused on the triple challenge of making public finances sustainable; boosting employment; and building the foundations for sustainable growth.

Education is a large and growing item of public expenditure in most countries. Public spending in this area across the OECD represents, on average, around 5.5% of GDP. This is an encouraging trend. Investing in education means building a better future. As the Spanish Minister for Education told me recently: “saving in education turns out to be very expensive in the end”.

The current crisis and its social legacies have highlighted, like never before, the crucial role of education
The financial and economic crisis has had a particularly strong impact on young people with low levels of education. Our study reveals that unemployment rates for those who did not complete high school rose by almost five percentage points between 2008 and 2009. This is a tragedy. Most of these youngsters will have great difficulties to return to the labour market.

Most serious is the situation of 15-19 year-olds who are not in education. Almost half of these youngsters (45%) were unemployed or out of the labour-force. People with tertiary degrees, by contrast, fared much better.

Unemployment levels for this group rose by less than two percentage points. And close to three quarters of tertiary graduates found a skilled job in their first years in the labour market.

Investments in education pay large and rising dividends for individuals, but also for economiesEven though investing in education has many benefits, one area that has not been focused on enough is tax revenues. At a moment when countries are making huge efforts to consolidate their fiscal positions, education stands out as a generator of greater tax revenues.

Let me give you a compelling figure: On average, a man with a university degree will generate $119,000 more in income taxes and social contributions over his working life than someone with a high-school degree only.

Even after taking the cost of university education into account, the net public return from an investment in tertiary education is $86 000 for a male, in generated income taxes and social contributions over his working life. Enhancing tertiary education attainment can therefore help governments increase their fiscal revenues, making it easier to boost their social spending, in areas like, for example… education.

Moreover, lower levels of education breed higher labour costs
Countries with low tertiary attainment currently pay up to four times higher labour-costs for university graduates than for people without upper secondary education. That ratio is typically around two to one in countries with average/above-average supply of higher education. The high ratio ─ a four times difference in labour costs ─ can only be sustainable for countries with low overall labour costs.

Part of the variation in labour costs for individuals with higher education is linked to supply, as a short supply of university-educated individuals in relation to rising demand typically drives up the cost to employers.

As the global demand for jobs moves up the skills ladder, it will be crucial for countries to develop policies that encourage the acquisition and efficient use of these skills to retain both high value jobs and highly skilled labour.

Fortunately, we can report that most OECD countries have made important progress in raising tertiary attainmentIn fact, our study reflects that education systems have responded with a massive expansion of tertiary education.

On average, across OECD countries, 35% of 25-34 year-olds have completed tertiary education, compared with 20% of 55-64 year-olds. Growth rates have differed widely across countries, Finland for example moved from rank 11 to rank 1 since 1995 (now at 63%), while the US dropped from 1st to 14th.

Importantly, this rapidly rising supply of better educated people has not led to a decline in their labour-market outcomes, something we have seen at the low end of the skills spectrum.

The fact that labour markets have absorbed the significant increase in individuals with tertiary education shows how rapidly labour market demand for skilled labour is changing. As labour markets change, adults will also need to be able to re-enter education to upgrade their competencies or to change their professions.

Promoting adult education is crucial, but here we still face considerable challengesDespite the fact that more than 40% of the adult population across the OECD already participate in formal and/or non-formal education in a given year, there are still important disparities. Not just between countries, but also across education and age groups.

For example, individuals with a tertiary level of education are almost three times more likely to participate in further education than those who have not acquired an upper secondary level of education. This means that those who need such training most are least likely to benefit from it in current education systems.
Policies must therefore introduce innovative ways of bringing back adults without an upper secondary level of education to join adult educational programmes.

Let me highlight one more interesting conclusion of this report:

The internationalisation of education keeps growing at high speedMore and more people are enrolling in education outside their home country. This generates benefits for the students concerned, as well as academic and commercial benefits to receiving countries. In 2008 over 3 million tertiary students were enrolled outside their country of citizenship; an 11% increase from the year before.

New players are emerging in an increasingly competitive market for international education. Over the past decade, the Russian Federation expanded its share of international students enrolled in OECD countries by two percentage points and Australia, Korea and New Zealand expanded their share by one percentage point respectively.

Over the same period, the share of the US dropped from 26% to 19%, and Germany, the United Kingdom and Belgium also lost ground. China accounts for 17% of all international students enrolled in OECD countries.

Ladies and Gentlemen:
We are moving towards a new phase in education. A phase that will measure the success of education systems no longer by how much countries spend on education or by how many individuals complete a degree, but by the educational outcomes achieved and by their impact on economic and social progress.
To recover faster from the economic crisis and achieve long term sustainable growth, our countries need their supply-driven education systems to respond to rapidly changing demands for skills.

Educational policies need to be based on a solid understanding, both of the development of skills, and also of how effectively economies use their talent pool, and of how better skills will translate into better jobs, higher productivity, and ultimately, better economic and social outcomes.

We hope that this edition of EAG, as well as the new OECD Skills Strategy that we are currently developing and which will be launched in 2012, will help governments address these crucial challenges.
Thank you very much.